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The largest Chinese LCD panel makers are cutting production in October. BOE, TCL CSOT and HKC are using the holiday period in China to temporarily halt parts of their production lines, primarily those responsible for television panels. Reduced supply is intended to help cut inventories and stabilise prices ahead of the year-end.
Factories slow down for several days
According to TrendForce, utilisation of large panel fabs is set to fall in October to around 79.6%, a decline of 4.2 percentage points from September. TCL CSOT plans seven-day stoppages at some plants, BOE will curtail operation of its 10.5-generation line for about 4 to 5 days, and HKC, depending on the factory, expects stoppages of 3 to 7 days. However, it's not just an attempt to raise prices. Demand for TV panels in the fourth quarter is expected to fall by around 4% quarter on quarter, and manufacturers want to avoid building up inventories. At the same time, panel production costs are expected to rise in Q4 by around 4–7%.
Chinese manufacturers are gaining an increasing advantage
As we wrote in one of our news items, the situation is significant also because BOE, TCL CSOT and HKC now account for around 70% of the global supply of LCD panels for televisions. That means decisions by a few companies can increasingly affect the whole market. In September the largest Chinese manufacturers also sent customers notices of panel price adjustments. Among the recipients are, for example, Samsung, LG and Sony. The production cut in October therefore further strengthens suppliers' negotiating position ahead of the holiday season.
This does not automatically mean that TVs on shop shelves will immediately become more expensive. Manufacturers can draw on earlier stocks or partly absorb the higher costs themselves. However, pressure on panel prices is another factor that could limit the scale of promotions at the end of the year.
Sources: TrendForce, DigiTimes
